South Africa’s first quarter GDP contracts for the fourth time in a row ‒ a deep contraction, too

SOUTH AFRICA - Report 04 Jun 2019 by Iraj Abedian

Despite our expectations of a GDP contraction during the first quarter of 2019, it was still disappointing when results released by Statistics South Africa today confirmed that indeed GDP had a much deeper contraction than expected at -3.2% following 1.4% in the fourth quarter of 2018. This was the largest decline in South Africa’s quarterly GDP since the -6.1% recorded in the first quarter of 2009, i.e. during the great recession.

There also appears to have emerged an undesirable pattern over the last few years – that of GDP growth contracting in the first quarter of the year. This has happened since 2016 on a consecutive basis, meaning this is the fourth straight first quarter GDP contraction experienced by the South African economy. What’s more, Graph 1 shows that since 2014, contractions of South Africa’s quarterly GDP have become a more frequent occurrence.

It is important to remember that the country experienced a technical recession due to the two quarterly GDP contractions in H1 2018, and this could happen again should the ailing economy fail to grow in Q2 2019. Nonetheless, given the deep contraction in the first quarter, the economy might at least manage a positive metric in the second quarter due to the base effect.

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